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Bulgaria introduces “abuse of stronger bargaining position” regulation in its competition law

The new regulation applies to all industries and introduces a broad notion of “stronger bargaining position” and a more general theory of harm.

On 9 July 2015, the Bulgarian Parliament amended the Act on the Protection of Competition to introduce a ban on the abuse of stronger bargaining position and a bespoke sanction regime for its breach. Although initially intended to tackle the economic asymmetries in the retail food sector, the amendments will also affect other industries. They would apply across the board to commercial relations that may be prone to disparities in negotiating powers.

Stronger bargaining position

Whether an undertaking has a stronger bargaining position will be assessed by reference to its market position, the structure and competitive landscape of the relevant market(s), and the level of economic dependency of business partners on that undertaking. The latter criterion is expected to inform the assessment to the greatest extent. Economic dependency will essentially be gauged with view as to whether the allegedly stronger undertaking is an inevitable or preferred trading partner (i.e. a “gatekeeper”), or if alternative channels for the distribution or supply of the products in question exist. On that basis, manufacturers and suppliers, as well as distributors and buyers, may qualify as having a stronger bargaining position.

The test, as it stands now, is evidently broad and would still require refinement. A number of undertakings from various industries would likely qualify as indispensable trading partners one way or another. For example, the Bulgarian competition authority regularly treats first movers in an industry and undertakings with special rights over given infrastructure as gatekeepers, irrespective of the supply and demand alternatives.

The prohibition of abuses of stronger bargaining position

The new regulation bans undertakings with a stronger bargaining position from engaging in unfair commercial conduct that may harm the interests of weaker party and consumers. Unfair conduct is considered any action or omission to act that has no objectively justifiable economic ground. Refusal to supply (including unjustified termination of commercial agreements) and discrimination (including imposing unjustifiably more burdensome terms) are by definition regarded as unfair commercial conduct.

The overall raison d'être of the regulation suggests that a lack of an objectively justifiable economic ground is intended to mean an absence of sound economic reasoning or of an economic benefit being offered in return for consideration. Although the new regime has similarities with the regulation of economic dependency in Germany, it remains to seen what criteria would be brought to bear in practice when assessing the existence or lack of economic reasoning behind a transaction.

The proliferation of claims

Over the past several years, the Bulgarian competition authority has most often been seized with claims against undertakings with some sort of stronger market presence regarding their abusive refusal to supply or discrimination. We expect that the new regulation would give a significant boost to this trend. While under mainstream antitrust rules, a certain degree of market power (dominance) on the part of the investigated undertaking must be proven in order to make a case, the new regulation does away with this requirement. It would be sufficient for the complainant to prove economic dependency in the general terms explained above in order for a probe to proceed. Claims (sometimes frivolous) are a commercial reality in Bulgaria in regulated industries such as telecoms, utilities, pharmaceuticals (especially wholesale trade), media and advertising, and retail food.

Sanctions

A percentage-based fine may be imposed in cases of established abuses of stronger bargaining position. The fine is capped at 10%, specifically, of the annual net sales of the product(s) concerned by the unfair commercial conduct. A reference year would be the last financial year preceding the imposition of the fine. However, the sanction may not be lower than BGN 10,000 (approximately EUR 5,000). If no sales of the product concerned have been achieved in that year, a fine in the range between BGN 10,000 (approximately EUR 5,000) and BGN 50,000 (approximately EUR 25,000) is set.

Injured parties may also claim redress for damages incurred as a result of the breach under Bulgarian antitrust damage claim rules.

Retail food-specific regulation

The same amendments also introduce changes to the Bulgarian Foods Act that ban certain arrangements between food manufacturers and traders, such as:

limitation of or sanctions for proving similar or better commercial terms to third parties (the “most favoured-nation clause”);